“Tokens are the atomic unit of the Web3 and are collectively managed by a distributed ledger. They can be issued with just a few lines of code with a smart contract. Token contracts are rights management tools that can represent anything from a store of value to a set of permissions in the physical, digital, and legal world. They might affect the financial world similar to how the Internet affected the postal system.” (…) “Tokens are to the Web3 what websites were to the Web1.”

Cited from: “Token Economy, How the Web3 reinvents the Internet”

“If we assume that the WWW revolutionized information, and that the Web2 revolutionized interactions, the Web3 has the potential to revolutionize money, agreements and any type of social and economic value exchange. The Web3 consists of a set of protocols that are collectively managed instead of centrally managed, thereby changing the power structures and data structures in the backend of the Internet. Blockchain networks or similar distributed ledgers are the backbone of this Web3, introducing a universal state layer. The Web3 allows any Internet user to co-manage public Internet infrastructure, often by incentivizing network actors with a token.”

Cited from: “Token Economy, How the Web3 reinvents the Internet” (2nd Edition)

“Blockchain networks build on the idea of P2P networks. They collectively manage the state of all token transactions via a universal data set - the ledger of transactions. Every network participant can trust that data set, even though they might not know or trust each other, because immutable copies of the ledger are stored and managed on every node in the network. Economic incentives in the form of native network tokens are applied to make sure that all network interactions are fault tolerant, attack resistant, and collusion resistant. Network rules are encoded in and enforced by the network’s protocol.”

Cited from: “Token Economy, How the Web3 reinvents the Internet” (2nd Edition)

“Decentralized financial (DeFi) refers to a series of smart contracts that have been developed for the automatic settlement of financial transactions beyond simple payments networks such as P2P asset issuance, trading, lending and hedging. The term “DeFi” encompasses any decentralized and permissionless financial application that builds on top of distributed ledgers such as: (i) privacy-preserving payment systems (privacy tokens); (ii) stability preserving payment systems (stable tokens), (iii) P2P exchanges (token exchanges); (iv) P2P fundraising (token sales), (v) P2P credit and lending (decentralized lending), (vi) P2P insurance, and (vii) a growing list of P2P derivatives. These Web3-based DeFi applications could, potentially, open traditional financial services to the general public, mitigating current inefficiencies of financial markets.”

Cited from: “Token Economy, How the Web3 reinvents the Internet” (2nd Edition)

“Carbon finance is a term that refers to financial infrastructure for environmental projects that focus on the reduction of carbon emissions in one form or the other. Carbon emission markets are an example for a carbon finance tool. The proposed biodiversity tokens create a new type of Web3 based “sustainability finance” or “regenerative finance” (aka ReFi) that has elements of micro-investments. It can create direct employment opportunities and other infrastructural investments aimed at protecting and monitoring animals in their natural habitat. Using blockchain networks and other Web3 infrastructure has the advantage of providing a publicly verifiable settlement infrastructure for sustainability certificates and microfinancing tools, which can resolve accountability issues. In recent years, a wide range of initiatives have started to use Web3 infrastructure for deploying various regenerative financial projects. The acronym “ReFi” has been adapted from “DeFi” and refers to a series of Web3 based projects that aim to creating a more equitable and sustainable financial system that is publicly verifiable.”

Biodiversity Certificates: Verra is an example of a standardization body that aims to create quality standards for CO2 certificates. Such standards are a prerequisite for CO2 markets as they provide comparability benchmarks and develop evaluation tools to quantify and qualify the amount of CO2 captured, which in turn is the basis for the comparability and tradability of CO2 certificates. Verra most recently also introduced a CO2 certificate that includes sustainable development goals other than pure CO2 capture. Their Climate, Community & Biodiversity (CCB) standard helps to identify projects that “simultaneously address climate change, support local communities and smallholders, and conserve biodiversity.”  Some countries such as Australia have also announced the introduction of biodiversity certificates. New Zealand set legal precedent in 2018 by granting status of legal entity to a body of water. Such policy making tools, however, are also highly contested by some conservationist groups. Their effectiveness will depend on the way they are put into action.

Web3 applications can be used to create tokenized CO2 certificates that are publicly verifiable that are managed by a more transparent and cheaper settlement infrastructure for such certificates.

“Carbon sequestration services refers to the process of capturing carbon dioxide (CO2) from the atmosphere through geological or biological means. It is one of many methods for reducing the amount of carbon dioxide in the atmosphere. The biological process can be induced by - for example - changes in land use or agricultural practices. Crop land, especially monocultures that are converted in land for non-crop growth, or a diverse array of fast growing plants, can contribute to the restoration of the natural carbon capture process that was previously destroyed. The rates of photosynthesis via land-use practices can also be increased with reforestation and sustainable forest management. Dense forests with a strong biodiversity, including kelp beds and other forms of plant life can absorb CO2 from the air as they grow, and bind it into biomass. However it is important to keep in mind that such biological carbon stores represent a volatile form of so called “carbon sinks.” Long-term sequestration can only be guaranteed with continued carbon capture activities by plantlife and will be disturbed by events such as wildfires or diseases in wildlife and plantlife, which release the sequestered carbon back into the atmosphere.”

Cited from: “Token Economy, How the Web3 reinvents the Internet” (2nd Edition)

“Carbon offsetting refers to the act of funding the removal of carbon dioxide or other greenhouse gases that were generated in another geographical place. The unit of account that is used to measure the amount of carbon that is being reduced and offset is denominated in tonnes of CO2e (carbon dioxide-equivalent).”

Cited from: “Token Economy, How the Web3 reinvents the Internet” (2nd Edition)

“Carbon accounting refers to processes defined to measure how much carbon dioxide equivalents (CO2e) an individual or organization emits. Such an accounting system helps to measure the amount of carbon emitted and reduced on both sides of a carbon market. Currently we have no standardized global accounting system of who produces carbon emissions and who captures carbon emissions. Some institutions such as nation states, local communities and companies already quantify their carbon footprint calculations in so-called “national inventories” and “corporate environmental reports.” While the adoption rate of such carbon accounting systems is growing, the systems are often not public nor internationally standardized. They have limitations - especially regarding measurement accuracy and trustworthiness. While the Paris agreement and other international treaties have started to create the conditions for such an accounting system and subsequent carbon offsetting markets, we are far from collecting publicly verifiable  global data to reward all those who naturally contribute to carbon offsetting and other sustainable activities.”

Cited from: “Token Economy, How the Web3 reinvents the Internet” (3nd Edition)

“The biggest factors that lead to an increased human induced emission of carbon dioxide results from burning fossil fuels such as coal, oil, or natural gas. The growing population density in urban areas is another factor. As densification of urban areas leads to the increased concealing of topsoil, biodiversity is lost and the temperatures in cities rise, which is why it is ever more important to protect the non-urbanized areas as much as possible. Rising global temperatures can also lead to more wildfires that again lead to the release of carbon that has been previously been captured by plantlife. The continuous growth of global trade and global travel also increases CO2 emissions, as both human travel and goods transport have a considerable CO2 footprint. Unsustainable agricultural practices such as an excessive use of fertilizers, monoculture farming practices as well livestock farming are another factor that increase the release of CO2 emissions.”

Cited from: “Token Economy, How the Web3 reinvents the Internet” (3nd Edition)

“Carbon sequestration refers to the process of capturing carbon dioxide (CO2) from the atmosphere through geological or biological means. It is one method of many methods of reducing the amount of carbon dioxide in the atmosphere. The biological process can be induced by - for example - with changes in land use or agricultural practices. Crop land, especially monocultures, that are converted in land for non-crop growth of a diverse array of fast growing plants can contribute to a natural carbon capture process. The rates of photosynthesis via land-use practices can also be increased with reforestation and sustainable forest management. Dense forests with a strong biodiversity, including kelp beds and other forms of plant life can absorb CO2 from the air as they grow, and bind it into biomass. However it is important to keep in mind that such biological carbon stores represent a volatile form of carbon sinks. Long-term sequestration can only be guaranteed with continued carbon capture activities by plantlife and will be disturbed by events such as wildfires or diseases in wildlife and plantlife, which release the sequestered carbon back into the atmosphere.”

Cited from: “Token Economy, How the Web3 reinvents the Internet” (3nd Edition)

“The Kyoto Protocol, adopted in 1997, established the first legally binding emissions reduction targets for industrialized countries. The first carbon market trades took place in the early 2000s under the Kyoto Protocol's emissions trading mechanism. On one side of the market are those who contribute to increased carbon emissions, on the other side are projects that reduce carbon emissions or capture or sequester CO2. The Paris Agreement, adopted in 2015, set the stage for a new era in international climate action. The European Union Emission Trading Scheme - for example - is a compliance market where public and private institutions such as companies, local communities or nation states can buy carbon offsets in order to comply with mandatory and legally binding limitations (caps) of the amount of CO2 they are allowed to emit per year, given the international treaties they have signed. The failure to comply with these caps results in legal penalties. In parallel with the compliance-based markets, voluntary carbon markets emerged to allow companies and individuals to voluntarily offset their emissions. Voluntary markets offer individuals, companies, NGOs, and even governmental organizations the possibility to buy carbon offset certificates when they wish to mitigate their greenhouse gas emissions. Companies often buy certificates from voluntary markets as a voluntary measure for their  “Corporate Social Responsibility” (CSR) reports or to receive better “environmental, social, and corporate governance” aka ESGs ratings. Voluntary markets are offered by a wide array of certification programs such as the “Puro Standard”, the” Verified Carbon Standard” (VERRA), the “Gold Standard,” or the “Climate Action Reserve.””

Cited from: “Token Economy, How the Web3 reinvents the Internet” (3nd Edition)

“Carbon emission producers can invest in and fund the removal of carbon dioxide or other greenhouse gasses that were generated in another geographical place. The unit of account that is used to measure the amount of carbon that is being reduced and offset is denominated in tonnes of CO2e (carbon dioxide-equivalent). The type of project that is typically funded with the selling of CO2 certificates are projects that invest into the production of renewable energy (biomass, biogas, wind or hydroelectric) or projects that support the reduction of consumption (energy efficient electric devices.) Furthermore projects that contribute to the reduction of various types of agricultural or industrial pollutants such as landfill methane are also funded by carbon offsets.”

Cited from: “Token Economy, How the Web3 reinvents the Internet” (3nd Edition)

“Carbon offsetting systems today are still in their early stages and face considerable transparency challenges. The current systems often suffer from information asymmetries and time lags regarding where the money flows and how the revenues are shared. There is also an issue with corruption, known as “carbon bandits” who double or triple sell carbon offsetting certificates. Furthermore, the quality of carbon offset can vary greatly from project to project and also needs to be taken into account to avoid superficial “greenwashing.” Another challenge of pure carbon offsetting markets is that they provide a carbon centric, which does not automatically resolve other related sustainability issues. Carbon emission and carbon capture are only a trickle down effect which starts with the maintenance or loss of biodiversity and natural habitats of plant and animal life. Pure carbon offsetting systems do not prevent natural biodiversity destruction or wildlife crime.”

Cited from: “Token Economy, How the Web3 reinvents the Internet” (3nd Edition)

The biggest factors that lead to an increased human induced emission of carbon dioxide results from burning fossil fuels such as coal, oil, or natural gas. The continuous growth of global trade and travel have also increased CO2 emissions. The growing population density in urban areas is another factor, as it leads to the concealing of topsoil, loss of biodiversity, loss of O2 production and CO2 capture, and rise of temperatures in and around cities. Concrete does not cool down as much as natural spaces, which is why it is ever more important to protect or regenerate the non-urbanized areas as much as possible. Unfortunately, these non- urbanized areas are affected by unsustainable agricultural practices. The excessive use of fertilizers, monoculture farming practices or heavy machinery that compacts soil, contribute to the loss of biodiversity. The cascading effects of modern agricultural practices result in less water retention, decreased capacity to produce O2 capture CO2, all contributing to rising global temperatures, which can lead to an increase in wildfires that again lead to the release of carbon that has been previously been captured by plantlife.

Ecosystem services & biodiversity offsets: The term “ecosystem services” is a more holistic term and approach that became popular with the Millennium Ecosystem Assessment by the United Nations  in the early 2000s. It refers to the maintenance of balanced ecological systems - both the organisms and the physical environment with which they interact. When the biological balance of agroecosystems, aquatic ecosystems, grassland ecosystems, or forest ecosystems change, often starting with biodiversity loss, this has negative effects on the conditions and quality of life of human beings, by impacting the provision of clean air, water, waste decomposition, climate stability, and food quality. It is an interrelation that scientists and environmentalists have discussed for decades if not centuries, but the fallout of which is only now becoming evident to a general public in recent years. Ecosystem services also encompasses the ability of CO2 to be captured by plantlife and animal life and in geological formations, but CO2 is only one of many factors, next to soil quality, water retention, water quality, biodiversity maintenance and many others. As of today, only CO2 has a market, but certain standardization bodies such as “Verra” - one of the leading standardization bodies for CO2 certificates - are starting to include so-called “biodiversity offsets” into the equation when issuing CO2 certificates.

“Sustainable Development Goals (SDGs) were born at the United Nations Conference on Sustainable Development in Rio de Janeiro in 2012. The objective was to produce a set of universal goals that meet global challenges. The Sustainable Development Goals are organized into 17 goals, which cover 169 more detailed targets. They cover social, environmental and economic aspects, and they often influence each other which means that they cannot be dealt with in isolation. Environmental sustainability, however, is only one goal next to several other interdependent sustainability goals such as social sustainability and economic sustainability, and carbon offsetting is only one of many targets in the global attempt to achieve environmental sustainability by fighting biodiversity loss, climate change, soil erosion, etc.”

Cited from: “Token Economy, How the Web3 reinvents the Internet” (3nd Edition)

The term 'natural capital' is attributed to economist E.F Schumacher, who presented the concept in his 1973 book Small is Beautiful. There are many definitions of the term. A typical example is the one developed by the Natural Capital Coalition after a a long consultative process:

Similar definitions can be found in the OECD Glossary of Statistical Terms and the United Nations Glossary of Environmental Statistics.

The concept of natural capital extends beyond nature as a source of raw materials for production (e.g. timber) to include the role of the environment and ecosystems in supporting human well-being through the supply of such important goods and services as clean water, fertile soils and valuable genetic resources.

Since the early 1970s, interest in in the practical applications of a natural capital perspective has grown considerably within government, business, civil society and academic communities.

Natural capital accounting (NCA) is an umbrella term covering efforts to use an accounting framework to provide a systematic way to measure and report on stocks and flows of natural capital. Its underlying premise is that since the environment is important to society and the economy, it should be recognized as an asset that must be maintained and managed, and its contributions (services) be better integrated into commonly used frameworks like the System of National Accounts.

NCA covers accounting for individual environmental assets or resources, both biotic and abiotic (such as water, minerals, energy, timber, fish), as well as accounting for ecosystem assets (e.g. forests; wetlands), biodiversity and ecosystem services.

The SEEA is the accepted international statistical standard for environmental-economic accounting, providing a framework for organizing and presenting statistics on the environment and its relationship with the economy. It brings together economic and environmental information in an internationally agreed set of standard concepts, definitions, classifications, accounting rules and tables to produce internationally comparable statistics.

Environmental-economic accounts are integrated statistics that illuminate the relationship between the environment and the economy, both the impacts of the economy on the environment and the contribution of the environment to the economy. Environmental-economic accounts can provide information about the extraction of natural resources, their use within the economy, natural resource stock levels, the changes in those stocks during a specific period and economic activity related to the environment. Environmental-economic accounts present this information in physical and monetary terms, as appropriate.

The SEEA is the accepted international standard for environmental-economic accounting, providing a framework for organizing and presenting statistics on the environment and its relationship with the economy. It brings together economic and environmental information in an internationally agreed set of standard concepts, definitions, classifications, accounting rules and tables to produce internationally comparable statistics.

Ecosystem assets are contiguous spaces of a specific ecosystem type characterized by a distinct set of biotic and abiotic components and their interactions. The definition of ecosystem assets is a statistical representation of the general definition of ecosystems from the Convention on Biological Diversity. Examples of ecosystem assets include forests, wetlands, agricultural areas, rivers and coral reefs.

Ecosystem assets are the building blocks for the accounting framework and provide the structure for the organisation of data about ecosystems. Ecosystem assets supply ecosystem services, either from a single ecosystem asset or by multiple ecosystem assets operating collectively. In this framing, ecosystem assets may be characterized as producing units. Ecosystem assets are measured by their extent and condition as well the basket of ecosystem services flows that they generate. Ecosystem assets are nested within the broader concept of environmental assets as defined within the SEEA Central Framework.

Ecosystem assets are classified into ecosystem types, where the IUCN Global Ecosystem Typology is used as reference classification.